Introduction In keeping with what has been a tumultuous year for our industry, the last few weeks of 2010 have continued in the same frenzied manner with an array of issues on the agenda – not least with the long awaited publication of the Localism Bill. Looking back over the past 12 months, the level and speed of change has been extraordinary, as the Coalition Government has begun to implement its own radically different approach. As always, throughout the year, we at the HBF have been committed to ensuring that house builders’ concerns are taken into account as policies have emerged. The Localism Bill and decisions on exactly how the New Homes Bonus system will work are two key building blocks in the system the new Government believes will deliver more homes. There is more detail on both of these issues below. We welcome the Government’s commitment to reduce regulation. Following our extensive lobbying work over many years, Housing Minister Grant Shapps spoke at the NHBC’s annual lunch last month and renewed the pledge made in the CSR to slash red tape and the cost of regulation. The unanswered question is how this reduction will be achieved – discussions on this have already started and we will play a key role in the process. Elsewhere the Zero Carbon Hub submitted its interim report on carbon compliance to the Housing Minister in mid December in accordance with the timescale set out in July. The Hub’s task was far from easy as it sought to gather evidence and listen to the views of all interested parties to determine whether the target of 70% set out by the previous Housing Minister John Healey was sensible. Their interim conclusion, supported by the vast majority of all the parties that took part in the process, is that 70% cannot be achieved and it has recommended a range of outcomes between 44% and 60% for flats and detached houses respectively. Some further work will be required to conclusively prove that these outcomes are deliverable on a commercially acceptable basis, and as such the percentages may still change. In the meantime I hope that the Minister looks favourably on The Hub’s recommendation even though it is at a lower level than previously proposed, and we can move on to determining how allowable solutions will work and thus conclude the process of setting the definition of zero carbon homes. KEY ISSUES The Localism Bill The Localism Bill finally saw the light of day on 13 December and will be one of the most important issues we need to deal with during 2011. There is no doubt that the proposals of the Localism Bill are a fundamental change to the planning system in many ways. The core principles of localism and decentralisation are clearly paramount to the coalition Government. However, that is not to say that the detail of the new process is not still debateable and amendable. We will be working hard at all levels with our members and other partners as the Bill progresses towards becoming legislation. The Bill is a vital and wide-ranging piece of legislation covering a huge amount in addition to the key provisions which will introduce the new locally-based planning system. We are currently studying its sections on planning change to identify the areas where we need to seek amendments or additions to the current clauses. Areas that remain central to members’ interests include transition to the new regime once the Bill abolishes the Regional Strategies, arrangements for the adoption of local development plans, new powers for neighbourhood planning and proposed requirements for pre-application consultation. It is positive, however, that the Government appears not now to be proposing a third party right of appeal and has confirmed its intention to abolish the current predetermination rules for councillors. We are about to circulate to you a briefing note containing our initial assessment of the main issues we need to address and will of course keep you fully updated on our discussions in the weeks and months ahead. We will, of course, be working closely with HBF members regarding their views of the many clauses contained within the 500 pages of the Bill as it progresses through the committee stages and debates in both Houses of Parliament over the next year or so. ‘Burden of Regulation’ The Spending Review, and subsequent growth white paper, contained a very important commitment to “reduce the total regulatory burden on the house building industry over the Spending Review period in order to help increase housing supply and support UK house building”. House building is the only industry to have received such a commitment, which must surely be taken as confirmation that all our work over the last three years on the regulatory burden and viability has been listened to. The commitment means that at the end of the Spending Review period, ministers will have to demonstrate to Treasury that they have reduced the net cost of regulation on home building, a formidable challenge given the looming very substantial additional costs of zero carbon in 2013 and 2016 and the provisions of the Flood and Water Management Act from 2011. Both will have to be offset by reductions in other areas of regulation. We circulated Grant Shapps’ letter of 25th November on Home Building Red Tape to all members. We are preparing an HBF response on behalf of the industry, but we have also urged member companies to make their own submissions. You know the nuts and bolts of the regulatory burden and red tape in much more detail than we do and will play a vital role in this process. I believe the most difficult regulation issue facing the Government is reconciling localism with deregulation. It is not at all clear whether the Spending Review commitment applies only to national regulation, or to all regulation, whether national, local or from various quangos and private utilities. Clearly it would be absurd if the Government reduced the cumulative national regulatory burden by 2015, only to have this negated by a local authority free-for-all of local policies and standards. We recently attended a DCLG roundtable discussion of various housing organisations on the proposed Local Standards Framework. We are not convinced DCLG’s proposal for a private sector standards body to own and manage local standards is the right approach. Instead we have put forward an alternative set of proposals designed to build checks and balances into the planning system. DCLG wants to spend the next three months exploring deregulation and localism with key housing organisations. We have also continued to hold periodic meetings with the Better Regulation Executive to discuss the broad thrust of the Government’s approach to deregulation and to raise specific concerns. Zero Carbon Hub - Carbon Compliance Standard Task Group The Carbon Compliance Standard Task Group that was set up by the Zero Carbon Hub in July at the request of the new Government to recommend an appropriate minimum carbon compliance standard for 2016, has submitted its interim report to the Housing Minister Grant Shapps ahead of its formal report which, will be delivered in the New Year. The carbon compliance level previously set by the last government was 70% - a percentage reduction on the 2006 Building Regulations Part L. However following extensive lobbying it was recognised that this is a challenging figure The Task Group has recommended in its interim report the following carbon compliance standards; Detached houses 10 kgCO2/ms/yr; approx a 60% reduction from 2006 Part L Attached houses 11 kgCO2/ms/yr; approx a 56% reduction from 2006 Part L Low rise apartments 14 kgCO2/ms/yr; approx a 44% reduction from 2006 Part L The Group also supported the concept of development averaging. Throughout the Group’s work, there has been a lot of discussion surrounding the designed v built performance of buildings. It is clearly understood that with only 19 houses having been assessed to date, we do not know the potential problems that might exist. Work will need to be done to clearly measure the gap and indeed what is causing it - through the SAP calculation, work on site, low carbon technologies not performing as manufacturer’s literature etc: The Group was keen to look at a Robust Detail type solution that would include research to clearly identify where any problem might exist, with a view to closing any gap over a period of ten years. This will need to happen as the carbon reduction levels recommended above are based on as built homes and not designed. There are still many hurdles to cross in all this. The recommendations in the report to go to the minister will have to be looked at by BRAC and will also be subject to public consultation prior to implementation. ECONOMIC AFFAIRS New Homes Bonus (NHB) The six-week consultation ends on 24th December. HBF circulated a draft response to members for comment. We have had several meetings with DCLG officials to discuss the Bonus and seek a better understanding of official thinking on a number of detailed issues. Given the critical importance of the NHB to the success of the Government’s planning reforms, the key message of our submission will be to keep the Bonus focussed on maximising its incentive effect on Local Authorities. Mortgage market The FSA’s proposals for tightening mortgage regulation took up a lot of our time in November. In HBF’s submission to the FSA we expressed our grave concerns about the potential impact of the proposals on the housing market and new home sales. We also raised our concerns with ministers and officials at DCLG and Treasury. HBF coordinated a letter to the Chancellor, George Osborne, signed by a range of housing organisations, highlighting the potentially very damaging impact of the proposals on home purchase. The FSA is now digesting the many responses it received to the consultation. We will of course keep HBF members informed of further developments. We have been discussing a number of drafting amendments to the CML Disclosure of Incentives form (DiF) with the CML, lenders, valuers and the Law Society. A set of draft amendments has been circulated to members for comment. We have persuaded the CML to delay implementation of the revised DiF until at least 1st February, rather than the original target of 1st January. We have also received a letter from the Chairman of the CML Valuation Panel seeking our views on extending the scope of the DiF. We are preparing a robust response to the CML. The provisions of Basle II and Basle III, along with much tighter mortgage regulation by the FSA, look set to make higher LTV mortgages permanently more expensive, and possibly restricted in availability. Therefore we need to find long-term solutions to bridging the deposit gap for first-time buyers. We are in discussions with a range of organisations about Mortgage Indemnity Insurance and several bespoke schemes designed to overcome the deposit gap. This is going to take time, but it is an extremely important aspect of HBF’s current activities. We are also looking at the possibility of a special mortgage facility tailored for small home builders, although it is early days yet. Household projections Publication of the latest set of household projections for England on 26th November was especially important, now that we are operating in a world without national or regional housing targets. Growth is now projected to be 232,000 households per year between 2008 and 2033. While this is a reduction of around 20,000 per year on the previous projections, it is still a formidable number in view of last year’s 118,000 housing completions, the lowest peacetime level since 1924. Affordable housing Affordable Housing funding and provision is being transformed. Grant is being severely cut, so that Affordable Housing numbers are predicted to fall. A new Affordable Rent model will dominate provision over the next four years. HBF has held several discussions with the HCA and DCLG. Affordable housing experts from four member companies have been chosen to assist officials to design the new model. We will continue to work closely with officials to make sure house builders’ interests are taken into account. Recent meetings John Stewart and I met officials at the Bank of England to update them on the housing market and new home trends. HBF was also asked to join a new Bank of England residential property forum. We were invited to meet the Deputy Prime Minister’s housing advisor at 10 Downing Street to discuss the housing and mortgage markets and housing supply. We have held discussions with Treasury and DCLG officials about the medium and longer-term outlooks for mortgage availability and regulation. It is reassuring to know that officials are aware of the very uncertain longer-term outlook for the mortgage and housing markets and first-time buyers, although no one has any easy answers. We held an update meeting with DCLG officials on Local Enterprise Partnerships (LEPs). In early November HBF attended a meeting organised by the national statistician who has been examining UK house price indices. Her report concluded that there should be a single definitive official house price index, and that this should be accompanied by a regular official statistics report, presenting and analysing official house price measures and their relationship to non-official sources and wider housing market indicators. EXTERNAL AFFAIRS Engagement with Government We held a very successful dinner discussion with Grant Shapps in mid-November which I was pleased many senior members were able to attend. We have built a very good relationship with the Minister and his colleagues which has enabled us to hold open discussions in which members can frankly raise their concerns on the mortgage situation, planning reform, the New Homes Bonus, the regulatory burden and other key matters. Contacts with the Opposition Following the appointment of the new Shadow Ministerial teams we have now held discussions with both Shadow Communities Secretary Caroline Flint and the Shadow Housing Minister Alison Seabeck to brief them on the industry’s main issues. In addition we have met Gordon Banks, a member of the Shadow Business team with a particular interest in housing and construction. The Opposition spokesmen are very much in listening mode and are indicating their willingness to raise issues on our behalf. It is encouraging that they have recognised the importance of tackling the current constraints on mortgage finance and the need to get any future mortgage regulation from the FSA right. Most recently, we were invited along with other bodies with an interest in housing, construction and planning to a discussion with the Shadow CLG team to provide our initial views on the Localism Bill and other current policy issues. It is clear from this that the front bench will be willing to consider sensible proposals from us for moving amendments to the Bill and we will maintain close contacts with them in the coming months. Engagement strategy As part of our Engagement strategy we published a new report – “Broken Ladder” -highlighting the plight of first-time buyers around the country in terms of their difficulty in saving for the level of deposit currently required to obtain a mortgage and the wider implications of inadequate supply. The report successfully achieved significant coverage in the national press and broadcast media which in turn drew Ministerial attention. The report was also used in Parliament by the CLG Select Committee and access to home ownership is an area we will continue to highlight as it grows in political and media significance. We are currently working on a further report highlighting the employment benefits of house building and the national and local economic benefit that increasing supply to the levels required would have. We aim to publish and promote this in the media shortly. CABE The future of CABE remains unresolved at the time of writing. We understand that DCLG has retained some future years funding relating to activities currently undertaken by CABE. Following the withdrawal of the Department for Culture’s funding, however, CABE is having to investigate possible means of recreating itself on a viable basis in partnership with other bodies or as a service provider. The outcome of this process will need to be approved by Ministers and is not yet known. We have separately continued discussions – which predate the Spending Review -with CABE and Design for Homes about the future management of the Building for Life initiative and are looking into the idea of establishing a joint not-for-profit company to oversee it. Clearly our wish will be to ensure that Building for Life which is already in wide currency can assist the industry in the way it is structured and run. We will keep you informed of developments on both these fronts. European representation It has recently been agreed that our European trade association – the UEPC – will run a one year trail of working in association with the European Property Federation. The aim is to increase the effectiveness of the industry’s voice in Europe through bringing together more resource in this way. If the trial is successful it could lead to a subsequent merger between the two European trade bodies. PLANNING NEWS Monitoring success in the new planning system Will the Government’s radical planning reforms work? How will we know? If we wait until official statistics for starts and completions are published, it will be far too late given the long lags involved in bringing forward schemes for development. Early in the New Year we will be launching a new set of planning statistics in a joint venture with research body Glenigan. The intention is to track the numbers of dwellings receiving planning permission every quarter, by regions and countries, as an early barometer of whether the planning reforms are working. Local Economic Partnerships (LEPs) The creation of 24 LEPs in October, and a further three in December is an important development. The remit of LEPs is largely related to supporting the recovering economy through achieving growth. Related to that, both in terms of building homes for the workforce but also as a major contributor to local economies as an industry itself, LEPs will become increasingly important in the discussions at a local level of both the quantum and location of residential development. HBF is aware of many members who are seeking to become involved with LEPs, either as board members or as part of housing working groups or similar advisory roles. HBF is keen to support such moves and to try to monitor involvement of the industry in these emerging bodies. I would ask, therefore, that if any members are seeking HBF support for their nomination as industry representatives or, where they have already been successful in being included in the work of the emerging LEPs that they contact James Stevens (james.stevens@hbf.co.uk) in order that we can keep abreast of the industry’s involvement. Planning application fees The Government’s recent consultation on proposals to allow Local Planning Authorities LPAs to set their own fees for determining planning applications raises an old debate over whether such scrutiny is a public service, payable out of the public purse, or a “service” to be paid for solely by those making such applications. HBF recognises that many members would have no objection to paying more for a better service from an LPA. However, there is no evidence to suggest that any of the previous increases in application fees has led to any measurable improvement in service levels. There are clearly some issues that the consultation does not adequately address; the monopoly of service provision provided by LPAs; the lack of a consistent methodology for assigning costs to the development management function within an LPA; and the comprehensive changes to the development management process (including the proposed introduction of mandatory pre application discussion) - this means that the application is a small part of the overall development process and that charges for pre application, application handling and post decision issues should be comprehensively reassessed as a whole rather than each in isolation. HBF will of course, be making these points in our response to the consultation before the closing date of 7th January 2011. We would encourage members to make similar submissions in order to counteract the inevitable support for the proposals from the 327 LPAs in England. Community Infrastructure Levy (CIL The new Government has decided to retain CIL – albeit subject to some tweaking. The legislation contained in the 2008 Planning Act and the subsequent 2010 CIL Regulations were the product of many hours of discussion and negotiation between HBF and interested parties including the Local Government Association, the Planning Officers Society, CLG and other development interest groups. The level of common ground and agreement was almost unprecedented and it would have been foolish to have simply scrapped the proposals as part of the localism changes. However, we are currently seeing many Local Authorities still seeking to adopt standardised S106 payments through supplementary planning documents rather than progressing with a CIL charging schedule. Wherever possible, HBF is responding to these emerging documents suggesting that the Local Authority moves instead towards a fully formed CIL. The commitment by the Government to CIL will, of course, give clarity and certainty to those Authorities who wish to introduce a standard charge for infrastructure associated with development rather than a site by site negotiation. It will certainly assist HBF in pushing those more tentative Authorities towards introducing CIL payment schedules which can be independently assessed, rather than forcing unrealistic S106 requirements on all development proposals or introducing unnecessary and costly delay through protracted site by site negotiations. TECHNICAL AFFAIRS Flood and Water Management Act There are still two consultations due out shortly relating to the Flood and Water Management Act. Build Standards (MBS) - we are receiving mixed messages from DEFRA and Water UK with regards to consultation dates, and indeed whether or not it will be a full consultation. The consultation on the Sustainable Urban Drainage (SUDs) standards we are hearing will not appear much before spring 2011 These will both be vitally important consultations and as such HBF will be holding workshop/consultations meetings once they are issued to formulate an industry response. We will be urging members to both attend these meetings and submit their own company responses. We will advise on workshop/consultations meeting dates as soon as we know when the consultations will be released. In the meantime if you are interested in attending can you please register your interest with rosie.hinchliffe@hbf.co.uk We have recently written to Defra Ministers asking them to give urgent attention to our concerns about the implementation of the Flood and Water Management Act – in particular the current uncertainty about transfer arrangements for private sewers and the new Mandatory Build Standards for adoptable sewers as well as bonding requirements and SUDS issues. Although very technical, the successful resolution of these issues is important to prevent the legislation creating new barriers to development. We will continue to pursue these issues into the New Year. Gas flues in ceiling voids – update. On December 2 the HSE issued an updated safety alert regarding gas flues in voids. This provides updated information to the original safety alert that was issued on October 2, 2008. This updated safety notice can be found on the following link http://www.hse.gov.uk/safetybulletins/fluesinvoids.htm The revised TB008 (edition 2) document entitled ‘Room-sealed fanned-draught/flue systems concealed within voids’ has also been released along with the TB008 (edition2) CIP-RACL document entitled ‘consumer information pack and risk assessment checklist’ As these are only available in the members section of the Gas Safe website HBF will be putting them on the our website under a gas safe logo in the Technical Section from next Monday (December 20) The documents come into force from 1st January 2011. Fire safety in timber framed buildings HBF attended a ministerial round table meeting to look at and discuss fire safety in timber framed buildings. The meeting was to gain a greater understanding from all stakeholders of perceptions of current issues and how where necessary, any problems could be rectified and managed. A further meeting is to be held in February to take this issue forward. In addition, the HBF Health and Safety Committee has a Timber Framed Working Group. A meeting of the Group has been organised for January to discuss the current situation. Due to the importance of the issue this meeting has been opened up to anyone from the main Health and Safety Committee with an interest in timber framed construction. Building Regulations. These following Building Regulations came into effect on October 1. Part F (means of ventilation), Part J (Combustion appliances and fuel storage) Part L (Conservation of Fuel and Power) L1A, L1B, L2A and L2B. To date they all seem to be bedding in, though we have heard that there are still issues surrounding the SAP methodology. HBF would like to hear from members with any issues surrounding these regulations. Ofgem Guaranteed Performance Standards OFGEM’s Guaranteed Performance Standards document has recently been released. The District Network Operators now have 19 standards that they are required to adhere to. Failure to adhere to any of these standards would result in fines payable to the developer for each day that there is a delay. There are different voluntary standards for other types of connection including multi-utility provider point of connection arrangements. These new standards will require a ‘bedding in’ period to see how effective they might be. It is generally expected however that they will lead to an improvement in performance levels. AND FINALLY... I am sorry this report is so long but it reflects the number of complex issues we are dealing with. I hope you have found the report useful and as ever, should you require any further information on anything or indeed wish to let us have your views on any of the items please don’t hesitate to contact me or any of the team at HBF. With the range of ongoing issues so vast, I am sure next year will be equally as frenetic as this. Please be assured that HBF will continue to robustly represent your interests in all these areas as we strive to create a climate in which our businesses can build the homes we know are needed. All that remains is for me to do is wish you a very peaceful Christmas and a happy, healthy and prosperous New Year. I will update you again in mid-February. Stewart Baseley Executive Chairman
